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Does Geography Explain Differences in Economic Growth in Peru?

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  • Máximo Torero
  • Javier Escobal

Abstract

In Peru, a country with an astonishing variety of different ecological areas, including 84 different climate zones and landscapes, with rainforests, high mountain ranges and dry deserts, the geographical context may not be all that matters, but it could be very significant in explaining regional variations in income and welfare. The major question this paper tries to answer is: what role do geographic variables, both natural and manmade, play in explaining per capita expenditure differentials across regions within Peru? How have these influences changed over time, through what channels have they been transmitted, and has access to private and public assets compensated for the effects of an adverse geography? We have shown that what seem to be sizable geographic differences in living standards in Peru can be almost fully explained when one takes into account the spatial concentration of households with readily observable non-geographic characteristics, in particular public and private assets. In other words, the same observationally equivalent household has a similar expenditure level in one place as another with different geographic characteristics such as altitude or temperature. This does not mean, however that geography is not important but that its influence on expenditure level and growth differential comes about through a spatially uneven provision of public infrastructure. Furthermore, when we measured the expected gain (or loss) in consumption from living in one geographic region (i. e. , coast) as opposed to living in another (i. e. , highlands), we found that most of the difference in log per-capita expenditure between the highland and the coast can be accounted for by the differences in infrastructure endowments and private assets. This could be an indication that the availability of infrastructure could be limited by the geography and therefore the more adverse geographic regions are the ones with less access to public infrastructure. It is important to note that there appear to be non-geographic, spatially correlated, omitted variables that need to be taken into account in our expenditure growth model. Therefore policy programs that use regional targeting do have a rationale even if geographic variables do not explain the bulk of the difference in regional growth, once we have taken into account differentials in access to private and public assets.

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Bibliographic Info

Paper provided by Inter-American Development Bank, Research Department in its series Research Department Publications with number 3103.

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Date of creation: Jul 2000
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Handle: RePEc:idb:wpaper:3103

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  1. Donald R. Davis & David E. Weinstein, 1997. "Economic Geography and Regional Production Structure: An Empirical Investigation," Harvard Institute of Economic Research Working Papers 1802, Harvard - Institute of Economic Research.
  2. Knight, J. & Song, L., 1990. "The Spatial Contribution To Income Inequality In Rural China," Economics Series Working Papers 99106, University of Oxford, Department of Economics.
  3. Moreno, Ramon & Trehan, Bharat, 1997. " Location and the Growth of Nations," Journal of Economic Growth, Springer, vol. 2(4), pages 399-418, December.
  4. John Luke Gallup & Jeffrey D. Sachs & Andrew D. Mellinger, 1998. "Geography and Economic Development," NBER Working Papers 6849, National Bureau of Economic Research, Inc.
  5. Guy Dumais & Glenn Ellison & Edward L Glaeser, 1998. "Geographic Concentration as a Dynamic Process," Working Papers 98-3, Center for Economic Studies, U.S. Census Bureau.
  6. Hentschel, Jesko & Lanjouw, Jean Olson & Lanjouw, Peter & Poggi, Javier, 1998. "Combining census and survey data to study spatial dimensions of poverty," Policy Research Working Paper Series 1928, The World Bank.
  7. Nass, Clifford & Garfinkle, David, 1992. "Localized autocorrelation diagnostic statistic (LADS) for spatial models : Conceptualization, utilization, and computation," Regional Science and Urban Economics, Elsevier, vol. 22(3), pages 333-346, September.
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  9. Sukkoo Kim, 1997. "Regions, Resources, and Economic Geography: Sources of U.S. Regional Comparative Advantage, 1880-1987," NBER Working Papers 6322, National Bureau of Economic Research, Inc.
  10. Escobal, Javier & Saavedra, Jaime & Torero, Máximo, 1999. "Los activos de los pobres en el Perú," El Trimestre Económico, Fondo de Cultura Económica, vol. 0(263), pages 619-659, Julio-sep.
  11. Anselin, Luc & Varga, Attila & Acs, Zoltan, 1997. "Local Geographic Spillovers between University Research and High Technology Innovations," Journal of Urban Economics, Elsevier, vol. 42(3), pages 422-448, November.
  12. John Luke Gallup & Jeffrey D. Sachs & Andrew D. Mellinger, 1998. "Geography and Economic Development," Harvard Institute of Economic Research Working Papers 1856, Harvard - Institute of Economic Research.
  13. Ravallion, Martin & Jalan, Jyotsna, 1996. "Growth divergence due to spatial externalities," Economics Letters, Elsevier, vol. 53(2), pages 227-232, November.
  14. Ravallion, Martin & Wodon, Quentin, 1997. "Poor areas, or only poor people?," Policy Research Working Paper Series 1798, The World Bank.
  15. Almas Heshmati & Subal C. Kumbhakar, 1997. "Estimation Of Technical Efficiency In Swedish Crop Farms: A Pseudo Panel Data Approach," Journal of Agricultural Economics, Wiley Blackwell, vol. 48(1-3), pages 22-37.
  16. Jyotsna Jalan & Martin Ravallion, 1998. "Geographic Poverty Traps?," Boston University - Institute for Economic Development 86, Boston University, Institute for Economic Development.
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Cited by:
  1. Philippe De Vreyer & Javier Herrera & Sandrine Mesplé-Somps, 2005. "Consumption growth and spatial poverty traps: an analysis of the effect of social services and community infrastructures on living standards in rural Peru," Ibero America Institute for Econ. Research (IAI) Discussion Papers 124, Ibero-America Institute for Economic Research.
  2. Javier Escobal & Máximo Torero, 2005. "Measuring the Impact of Asset Complementarities: The Case of Rural Peru," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 42(125), pages 137-164.
  3. Maribel ELIAS & Sergio J. REY, 2011. "Educational Performance And Spatial Convergence In Peru," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 33, pages 107-135.
  4. Escobal, J. & Ponce, C., 2011. "Spatial Patterns of Growth and Poverty Changes in Peru (1993 – 2005)," Working papers 078, Rimisp Latin American Center for Rural Development.
  5. Lubna Hasan, 2006. "Myths and Realities of Long-run Development : A Look at Deeper Determinants," Development Economics Working Papers 22193, East Asian Bureau of Economic Research.
  6. Kristjanson, Patricia & Krishna, Anirudh & Radeny, Maren & Kuan, Judith, 2006. "Pathways Into and Out of Poverty and the Role of Livestock in the Peruvian Andes," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25451, International Association of Agricultural Economists.
  7. Escobal, Javier & Torero, Maximo, 2003. "Adverse Geography and Differences in Welfare in Peru," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  8. Ngo, Thu Hien Laura & Santos, Paulo, 2012. "Geography and economic growth in Vietnam," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 126489, Agricultural and Applied Economics Association.
  9. Ngo, Thu Hien Laura & Santos, Paulo, 2012. "Geography and economic growth in Vietnam," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126491, International Association of Agricultural Economists.
  10. repec:asg:wpaper:1029 is not listed on IDEAS

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